GM bolsters N.A. earnings, cuts European losses

Net falls 53% on one-time expenses

DETROIT -- A jump in profits in North America and shrinking losses in Europe propelled General Motors' third quarter results, but Asia has emerged as a potentially lingering trouble spot.

Overall, GM's net income fell 53 percent from a year earlier, to $698 million, hurt by one-time expenses, including $800 million related to the repurchase of 120 million preferred shares from the UAW's health-care trust during the quarter.

Earnings before interest and taxes and excluding those nonrecurring items -- the figure that GM considers the best measure of its results -- rose 15 percent, to $2.64 billion. Rising production of trucks, which are high-margin products, and better pricing in both North and South America helped the bottom line, GM said today.

Revenue rose 4 percent to $38.98 billion.

There were signs of recovery in Europe. Losses shrank to $214 million, from $487 million a year earlier. Through the first nine months of the year, GM's European losses totaled $499 million, down from $1.18 billion a year earlier. GM Europe's $4.86 billion in revenue was the highest year-over-year quarterly result in two years.

"GM Europe has managed to stabilize key metrics like volume and pricing in an extremely challenging market," GM CEO Dan Akerson told analysts and reporters during a conference call.

GM should be able to command stronger pricing during the first half of 2014, when it will launch its next-generation of heavy duty pickups and SUVs, GM North America CFO Chuck Stevens said. "It's going to normalize a little bit," in the second half of the year, he said.

In a research note, Morgan Stanley analyst Adam Jonas called GM's results "good" but said there remains "many challenges on their go-to-market strategy, including the testing of their pricing discipline."

China 'on track'

Pretax profits in GM's international unit, which includes China and several Asian countries, sank 61 percent, to $299 million. GM said pretax income from its joint ventures in China was about $400 million, reflecting a combined loss of about $100 million for the other markets.

Ammann said GM's China business is "strong and on track." The weaker results in non-China markets, including India, Australia and other southeast Asian countries, stemmed from stiffer price competition, driven by the devalued Japanese yen, as well as "execution issues that we're working through," he said.

GM has said that its results in India have been hurt by an SUV recall there.

"There are ongoing challenges," Ammann said during the call. "We are taking very affirmative action to get the business back on the kind of track that it should be on. This is something we're going to be working on over the coming quarters."

15 straight quarters

The overall result marks GM's 15th straight quarterly profit since the company emerged from its 2009 bankruptcy. It has racked up more than $20 billion in profits since then.

"We have a lot of hard work ahead of us," Akerson said, citing the need to continue improving product quality, reduce GM's corporate complexity and keep logistics and materials costs in check. "When we have great products that are wedded to a competitive cost structure, I think we're in an unstoppable position."

GM South America posted a pretax profit of $284 million, up 79 percent from a year earlier, buoyed by stronger prices from recent product launches.

GM Financial, the company's lending arm, had $239 million in pretax income, up 20 percent from third quarter 2012.

The company's pretax profit margin in North America was 9.3 percent, the highest level in two years. GM executives have said they want to close the gap with Ford Motor Co., which posted a 10.6 percent third quarter operating margin.